TWINNINGINTERIM QUARTERLY REPORT
TWINNINGINTERIM QUARTERLY REPORT number: 6
EUROPEAN COMMISSION
TWINNING PROJECTS
INTERIM QUARTERLY REPORT
Project Title:
Development and consolidation of the National Commission for Financial Markets’ operational and institutional capacities in the field of prudential regulation and supervision.
Partners:The National Commission for Financial Markets of theRepublic of Moldova (CNPF)
The Polish Financial Supervision Authority(KNF)
Date: March2017
Twinning Contract number: Moldova- ENI/2015/363-321
General instructions
1.Overview
The Interim Quarterly Report/Final Report for the project comprises the following parts:
Section 1Basic data on the project
Section 2Content: progress achieved in the implementation of the Twinning project during the reporting period and schedule for the remaining period
Section 3Expenditure: actual expenditure in relation to budgeted expenditure
2.General guidance
- Throughout the entire Twinning project, at three-monthly intervals starting with the date of notification of endorsement / signature, the Project leaders may prepare Interim Quarterly Reports/Final Reports.
- Interim Quarterly Reports/Final Reports cover both substance and Finances.
- The deadline for submission of the Interim Quarterly Reports/Final Reports cannot be altered – The first interim quarterly report will most often refer to less than three months’ actual project implementation, since the arrival of the RTA in the BC and the beginning of the work schedule rarely coincide with the date of notification.
- The MS Project Leader in co-operation with the BC Project Leader will submit, within the month following each quarter, the interim quarterly reports to the concerned authority (see 6.4 of the Twinning manual).
- One copy of the Report must be sent at the same moment to the relevant Twinning Team in the Commission Headquarters
- The Report must be submitted in one of the following three languages: English, French and/or German.
3.Notice
- The approval of the Report by the relevant authorities is without prejudice to the Commission's right to suspend the activities of a project, terminate an agreement or take any other appropriate step should subsequent verifications reveal problems or significant divergences from the work plan, the budget or the conditions of the Twinning Contract as approved.
- The views expressed in this report do not necessarily reflect the views of the European Commission
Twinning Contract number: Moldova -ENI/2015/363-321
Section 1: Project data
Twinning Contract Number / ENI/2015/363-321Project Title: / Development and consolidation of the National Commission for Financial Markets’ operational and institutional capacities in the field of prudential regulation and supervision.
Twinning Partners (MS and BC) / MS: Polish Financial Supervision Authority (KNF)
BC: National Commission for Financial Markets of the Republic of Moldova (NCFM)
Report Number: / 6
Period covered by the report: / 12November2016 – 11 February2017
Duration of the project: / 12August 2015 – 11November2017
Rapporteur: / Prepared by:
Joanna Lipowczan, Project Manager from the Polish Financial Supervision Authority
GrzegorzWąsik, Resident Twinning Adviser from the Polish Financial Supervision Authority
Approved by:
Damian Jaworski, Project Leader from the Polish Financial Supervision Authority
Iurie Filip, Project Leader from the NationalCommission for Financial Markets of the Republic of Moldova
MS signature:
MS signature and date (i.e. MS Project Leader, Mr. Damian Jaworski): ……………………………
MS signature and date (i.e. MS Project Manager, Mrs. Joanna Lipowczan): ......
RTA signature and date (i.e. MS RTA, Mr. GrzegorzWąsik): ......
BC signature:
BC signature and date (i.e. BC Project Leader, Mr. Iurie Filip): ……......
RTA counterpart and date (i.e. BC RTA counterpart, Mrs. Veronica Cuhal): ......
Twinning Contract number: Moldova -ENI/2015/363-321
Section 2: Content
This section describes the activities of the project. It is divided in five sections.
2A – BACKGROUND
2B – ACHIEVEMENT OF MANDATORY RESULTS
2C – ACTIVITIES IN THE REPORTING PERIOD
2D – TIMING AND DELAYS
2E – ASSESSMENT
1
Twinning Contract number: Moldova -ENI/2015/363-321
2A – BACKGROUND
This report covers activities carried out in the sixthquarter of the project, in the period of 12November2016 until 11 February2017. This chapter comprises political developments directly linked to the subject of the project, the state of achievement of project objectives and the state of project assumptions.
Overall objectives
Overall Objective and indicators of achievement (as in Logframe) / State of achievement/ problems encounteredOverall Objective:
Development and implementation of the Risk Based Supervision System for the non-banking financial market participants, including capital market, insurance, pension funds and micro-finance based on the forecasting and evaluation of the risks and preventable consequences of some unfavourable events.
Alignment with EUacquis and implementation of best practices of EU in regard to non-banking financial market supervision.
Development and implementation of the Risk Based Supervision System for the non-banking financial market participants, including capital market, insurance, pension funds and micro-finance based on the forecasting and evaluation of the risks and preventable consequences of some unfavourable events accomplished.
A better methodology and standards of supervision of the non-banking financial market including capital market, insurance, pension funds and micro-finance in Moldova will allow a more efficient and secure application of supervisory system based on the forecasting and evaluation of risks. A well-functioning non-banking financial market in Moldova will contribute to economic growth, poverty reduction and employment as well as overall security and stability of non-banking financial market participants. / All activities performed in the sixthproject quarter were successfully implemented.
Within the reporting period the following project activities were implemented in line with the Twinning Work Plan and updated schedule, including:
the experts’ missionfocusedon the review of procedures on initial public offers and admission of securities to trading on regulated market(i.e. Activity No 2.10);
the experts’ missiondedicated toinvestment instruments issued by investment funds and services provided by investment funds management companies(i.e. Activity No 2.20);
the experts’ mission devoted to organizing and conducting public awareness campaign in the field of investment funds and financial instruments and related risks (i.e. Activity No 2.21);
the expert’s missionfocused onpublic communication in the field of responsible investing in the capital market, in cooperation with the media and some associations of individual investors(i.e. Activity No 2.22);
the experts’ mission dedicated to education activity concerning capital market and preparations of the structure of a booklet/guideline covering: key securities market infrastructure institutions, investment risks, role of information on the market (equal access to information etc.) (i.e. Activity No 2.23);
study visit on risk based supervision of capital market participants and undertakings for collective investments provided by the KNF in collaboration with the Warsaw Stock Exchange and the Central Securities Depository of Poland(i.e. Activity No 2.24);
the experts’ missiondedicated to presentation of the reporting requirements, including the general overview of the content of reports for insurers (i.e. Activity No 3.7);
the experts’ mission devoted tothe Solvency II Directive principles, regime, history and objectives(i.e. Activity No 3.8).
In order to accomplish the commitments assumed by the Republic of Moldova in the Association Agreement with the European Union and to harmonise legal framework, after a close cooperation with the Polish experts, in December 2016 NCFM developed and submitted for public consultations the Draft law amending the Law on joint stock companies No. 1134 of 02.04.1007. The draft law aims at transposing the provisions of Directive 2012/30/EU of 25.10.2012 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty on the Functioning of the European Union, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent as well as the provisions of the Second Council Directive 77/91/EEC of 13.12.1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent, as amended by Directives 92/101/EEC, 2006/68/EC and 2009/109/EC, Third Council Directive 78/855/EEC of 09.10.1978 based on Article 54 (3) (g) of the Treaty concerning mergers of public limited liability companies, as amended by Directives 2007/63/EC and 2009/109/EC, Sixth Council Directive 82/891/EEC of 17.12.1982 based on Article 54 (3) (g) of the Treaty, concerning the division of public limited liability companies, as amended by Directives 2007/63/EC and 2009/109/EC.
After finishing procedure of public consultations and legal expertise, the NCFM Council of Administration approved the final version of the Instruction regarding direct and indirect holdings which in December was registered by the Ministry of Justice and published in the Official Gazette. The above mentioned Instruction was consulted with the Polish experts during their missions in Chisinau.
Project purpose
Project purpose and indicators of achievement (as in Logframe) / State of achievement/ problems encounteredProject purpose:
Development and maintenance of an appropriate and effective regulatory and supervisory framework in accordance with the EU legislation and best practices to enable prudential regulation and supervision on the non-banking financial market.
Strengthening operational and institutional capacities of the NCFMaccomplished.
Development and maintenance of an appropriate and effective regulatory and supervisory framework in accordance with the EU legislation and best practices to enable prudential regulation and supervision in the field of:
- capital market and investment fundssector;
- insurance companies sector;
- savings and credit associations and pension funds sector.
During the sixth quarter of the project, activities scheduled within the Component 2 (Capital market and investment funds) were successfully completed and those withinComponent 3 (Insurance companies) wereinitiated.
During the second Component of the Project,a review of procedures on initial public offers was performed. As a consequence, a review report with recommendations based on the Prospectus Directive and the Prospectus Regulation was drawn up and working papers with draft documents for prospectus approval to be used in the supervisory practice were prepared.
In regard to raising awareness and improving public confidence in investment instruments and services on the financial market,a working paper for supervisory use in the field of investment instruments and services in the UCITS sector with thestructure of a booklet/guidelines on the impact of information on the securities market on the protection of clients were prepared. Moreover, workshopscovering the following topics: investment instruments issued by investment funds and services provided by investment funds management companies; financial instruments and related risks; public communication regarding responsible investing in the financial market and educational activities addressed to securities market participants were also organized.
The second Study Visit of the NCFM employees and two representatives of the Moldovan Parliament took place in Poland, at the KNF, the Central Securities Depositary of Poland and the Warsaw Stock Exchange.
The study visit summed up the experts’ missions conducted in Chisinau within Component 2. The participants were trained,amongotherthings,on risk-based supervision of UCITS/AIFs,investment firms’ retail clients and transactions, CRD IV subjects, public offer prospectus, Investor Compensation Fund, core and ancillary services of securities depositary,market makers, regulated market policies on market abuses and regulated market trading algorithm.
The third project component started with the workshop on Solvency II Directive regime history and objectives and the workshop on insurers’ reporting requirements. Recommendations on improvement of prudential reporting for insurers were developed and in addition certain templates for supervisory use were provided to the NCFM employees.
The input provided by the MS experts shall contribute to the establishment of a sound base to facilitate further efforts of the NCFM in development and maintenance of an appropriate and effective regulatory and supervisory framework in accordance with the EU legislation and best practices.
Thus, the NCFM capacities to regulate the non-banking financial market and strengthen their supervision functions in line with the EU acquis and best practices have started to increase.
Having the support and consultations of the Polish experts, the NCFM developed the draft law amending the Capital Market Law No. 171 of 11.07.2012 which improves the legal framework necessary for the development of the capital market of the Republic of Moldova, including the increase of investors protection, maintaining efficient and transparent markets, reducing systemic risks by transposing the EU Directives in the field of capital market, as well as development of the activity of UCITS and investment managers. In December 2016 the above mentioned draft law was submitted to related authorities and institutions for public consultations. Therewith, the chapter on UCITS was reviewed and amended from conceptual point of view and namely with regard to separate types of UCITS licenses, licensing of UCITS managers and was updated according to the provisions of Directive 2014/91/EU. The amendments and additions proposed were conceived in accordance with the EU legislation, especially with the provisions of Directive 2009/65/EC of 13 July 2009 of the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities and new UCITS Directive 2014/91/EU.
Using the recommendations provided in the Polish experts reports, the NCFM experts developed the new draft Law on Alternative Investment Funds which is now being consulted within the NCFM. Following the approval of the draft law by the NCFM Council of Administration it shall be submitted to interested authorities and institutions for public consultations.
In line with the recently adopted Law No.234 of 03.10.2016 on Single Central Securities Depository and in order to implement the provisions of this law, a draft law amending the related legislation, which includes the Law on Joint Stock Companies, Capital Market Law and Law on the NCFM was elaborated. After consultations with the Polish experts on the text of the Law, the NCFM provided its recommendations on the text of the law.
Policy Developments
In the reporting period the NCFM continued to improve the legislative and normative framework in the field of capital market and started the activities related to the insurance sector. During the reporting period the NCFM experts worked closely with the NBM team on examining the new legislation developed by the NBM to transpose the provisions of CDRs IV Directive related to banks and investment companies. In this field the recommendations and opinions of the Polish experts provided during the missions and during the study visit were very important.
During the reporting period the NCFM staff was involved in several activities related to raising awareness and improving public confidence in investment instruments and services on financial market. During these activities the NCFM experts acquired additional knowledge on the activities and incentives helping to raise awareness and improve public confidence in investment instruments issued by the undertakings for collective investments in transferable securities (UCITS) and services provided by the investment funds management companies.
Also, during these activities the NCFM experts received detailed information regarding the use of the regulatory authority website as main communication tool with market participants and consumers of financial services highlighting the importance of information and data published on the authority’s official website.
The NCFM experts learned about the role and content of social campaigns, including the stages to be completed and the questions to be answered when designing a social campaign and at the end the NCFM staff with the support of the Polish expert developed a social campaign on a topic related to the NCFM activity.
Within the first two activities related to insurance sector, the NCFM staff gained additional knowledge on the reporting requirements which should be applied to Moldovan insurers in line with the Solvency II Directive, EU Delegated Regulation, EU Technical Standards, and EIOPA Guidelines, including the applied valuation principles, the reported data and information, and the time and frequency of reporting. Base on the acquired knowledge and recommendations from the Polish experts, the NCFM shall revise the regulatory framework related to reporting requirements in insurance and amend it in compliance with the main EU standards.
Project Assumptions
In the reporting quarter the activities within the Twinning project have assisted the NCFM in fulfilling the commitments of the Republic of Moldova stipulated in the former Partnership and Cooperation Agreement between the European Union and the Republic of Moldova, repealed and replaced by the Association Agreementbetween the European Union and the European Atomic Energy Community and their Member States, of the one part, and the Republic of Moldova, which is currentlyin force.
In particular, the Twinning project has as main objective to contribute to the process of transition of the NCFM from compliance-based supervision to the establishment by the NCFM of the risk-based supervision for the three sectors of the non-banking financial market. The experts’ missions implemented in the sixth reporting period,were focused on the review of the legal framework on public offers and admission of securities to trading on a regulated market, on raising awareness and improving public confidence in investment instruments and services on financial market, as well as on improvement of prudential reporting for insurers and raising awareness on the Solvency II Directive principles. Within these activities recommendations and good practices from the perspective of conducting the risk based supervision were provided to the NCFM.
The activities undertaken will be subsequently continued and developed within the relevant project activities in line with the agreed Work Plan in the Twinning Contract.
2B - ACHIEVEMENT OF MANDATORY RESULTS
Results and indicators of achievement (as in Logframe) / State of achievement/ problems encountered